BlackBerry is unlikely to regain its lost mojo in the highly competitive smartphone market even if the deal with the consortium led by Fairfax goes through.
The $4.7-billion valuation roughly equals to one per cent of rival Apple’s $444 billion valuation and probably one the cheapest acquisition in the mobile technology space.
Jan Dawson, chief telecoms analyst at Ovum, said, “Taking BlackBerry private doesn’t solve the fundamental problems at the company. First, the company’s device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business.”
“BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It’s likely that BlackBerry will be out of the device business entirely by the middle of next year,” he added.
Next challenge
The next challenge is that BlackBerry’s other businesses are all to a greater or lesser extent dependent on its devices business. BlackBerry Messenger’s installed base is entirely on BlackBerry devices, and its launch on iOS and Android was aborted over the weekend. It’s mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors such as MobileIron and Airwatch. If you strip out BlackBerry’s use of its QNX operating system for BlackBerry devices, you’re left with a business that’s worth less than $100 million. About the only part of BlackBerry that looks to be worth a significant amount at this point is its patent portfolio, and that certainly wouldn’t justify the purchase price on its own.
‘long-term strategy needed’
“Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny. But BlackBerry’s key problem for the last couple of years has been the lack of such a long-term strategy. It simply hasn’t articulated a way to rebuild its business as its device sales drop precipitously. Unless Fairfax plans to radically change or accelerate BlackBerry’s strategy, it’s unlikely to be able to turn the company around. And that means we’re likely seeing the beginning of the end for one of the most iconic brands in mobile technology,” Dawson said.
In India too, BlackBerry’s performance has been more or less lacklustre in the past few quarters. “Their sales figures have been dwindling consistently and BB10 contrary to expectations did not really help in reviving numbers for them. Blame it on their pricing flaws or lack of aggression/marketing push the consumers have also moved on to other platforms from BB and the brand equity is no longer what it once used to be,” said Mansi Yadav, Senior Market Analyst for mobile phones and tablets at IDC. The market share for BlackBerry in the smartphone market has declined from 7 per cent in second quarter of 2012 to close to 2 per cent in second quareer of 2013.
Analysts said the Fairfax acquisition could be a step towards limiting the focus of the company to services and patents, which it might ultimately license them to other vendors.
“Just recently, we saw BBM for Android. So this could be the start of BlackBerry as a services company. Remaining listed and doing so could have been an option, but reaching that stage will take some more years if BlackBerry goes by this path of licensing technology. By remaining a private entity, they can perhaps focus more on being a technology licensing company,” said Faisal Kawooza, Lead Analyst, CyberMedia Research Telecoms Practice.
(With inputs from S. Ronendra Singh)